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Sebi’s crackdown spreads to new traders.

Published On: July 8, 2025
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India’s market regulator, Sebi, is now scrutinizing other foreign high-frequency trading (HFT) firms, expanding its crackdown on manipulative practices after taking action against US-based Jane Street.

Sebi Eyes More High-Frequency Traders

The Securities and Exchange Board of India (Sebi) has significantly widened its investigation beyond a recent action against Jane Street. Their new focus is on other foreign high-frequency trading (HFT) and quantitative trading firms operating in India.

The regulator is closely examining their trading patterns in the domestic stock markets. This aims to determine if these firms have used questionable strategies similar to those identified in the Jane Street case.

This move signals Sebi’s strong intent to tighten oversight on complex algorithm-driven trading, especially by global players. These firms account for a significant portion of the volumes in India’s derivatives market. Both NSE and BSE have been asked to analyze the trades of these foreign HFT and quant firms.

The Jane Street Crackdown

This intensified scrutiny follows Sebi’s strong action against the Jane Street Group on July 3. The firm was barred from the Indian market for allegedly engaging in trading patterns that raised serious concerns about market integrity, particularly around the expiry of index derivatives.

Sebi’s investigation found that Jane Street allegedly manipulated the Bank Nifty index. They used two unauthorized proprietary trading strategies: “intraday index manipulation” and “extended marking the close.”

The regulator stated that Jane Street made an alleged profit of over Rs 36,500 crore through these actions between January 2023 and March 2025. Sebi has since ordered the impounding of Rs 4,843.57 crore, identified as unlawful gains.

Other major algo trading firms active in the domestic market include Millennium Management, US-based Citadel Securities, Alphagrep Securities, and Tower Research Capital. Sebi Chairman Tuhin Kanta Pandey recently described the Jane Street case as a “surveillance issue,” indicating ongoing vigilance.

Balancing Market Liquidity and Regulation

While Sebi aims to ensure market integrity, market participants are urging caution. High-frequency trading firms play a crucial role in providing liquidity to the market, particularly in the derivatives segment.

Market experts believe Sebi will need to act in a balanced manner. Overly stringent actions could potentially deter foreign players, leading to a significant drop in trading volumes and market depth in India.

The regulator faces a delicate challenge: enforcing strict rules to prevent manipulation while continuing to attract foreign investment and maintain a vibrant, liquid market.

Potential Impact on Trading Volumes

The immediate fallout of barring a major player like Jane Street could be a temporary dip in Futures & Options (F&O) volumes. Market participants expect some impact on trading activity.

However, traders generally believe that the space left by Jane Street will eventually be filled by other players. While it’s hard to predict if the decline will be fully recouped, the impact on trading volumes is expected to gradually normalize over time.

  • Sebi is expanding its investigation to other foreign high-frequency trading and quantitative firms.
  • This follows the recent ban and impounding of funds from US-based Jane Street Group for alleged manipulation.
  • The regulator aims to tighten oversight on complex, algorithm-driven trading strategies in India.
  • Sebi faces the challenge of ensuring market integrity while also maintaining market liquidity, which HFTs contribute significantly to.

This ongoing scrutiny underscores Sebi’s commitment to fostering a fair and transparent market, even amidst the complexities introduced by advanced trading technologies.

Anshu Kaushik

Anshu Kaushik is an automotive analyst and business writer with over 8 years of experience covering market trends, consumer insights, and product innovations. With a background in finance and a lifelong passion for engineering, he bridges technical depth and economic perspective in his coverage. His work has been cited in business journals and product strategy briefs. Anshu’s insights help readers make confident, informed decisions in fast-moving sectors like cars and commerce. Find him on LinkedIn.

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